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CWA # 1620, 15 March 2025
Global Politics Explainer
Trump wants to retake the Panama Canal. Why?

  Vaneeta

4 March 2025, Donald Trump in his speech to the joint session of congress vowed to reclaim the Panama Canal to enhance the national security.  He has repeatedly said about taking the canal back in his address since December 2024.

Why and how was the Panama Canal built?
The Panama Canal was built in the twentieth century to find a shortcut for ships to make trade cheaper. In 1881, France made the first attempt to build the manmade waterway between the two oceans under Ferdinand de Lesseps, who was responsible for the success of the Suez Canal. The project, which was started by France in 1880, was abandoned in 1889 with the loss of 20,000 lives mainly to malaria, yellow fever and other diseases. 

The US had vast interest at the time of building the canal. Earlier ships had to go around the South American continent, but the canal shortened the distance to around 800 miles, which was five months shorter. Cutting down the travel time served two ways: one, it enhanced trade, making the cost cheaper, and two, it increased the efficiency of delivering goods.  For the US, it was a geopolitical strategy to have control over both the ocean. Two oceans surround the US, and at the end of the nineteenth century, many scholars were talking about the power of the sea and its influence on global order. 

The US also wanted to have military supremacy. Having a canal to connect to oceans expands the maritime power of the country tremendously. The US, which experienced the Spanish-American war in 1898, realised the need for shorter routes for its navy. Having a territory in Central America with administration control would help its military in times of war, which was one of the conditions later at the time of the handover of the canal to Panama. Finally, the US wanted to become the flag bearer of modern civilisation. The building of the canal was portrayed as a selfless act for humankind, which made them exemplary actors who could lead in another sector as well.  Therefore, having a canal in Central America to connect both oceans served the interest of the US.

Panama then was part of Colombia and did not agree to the conditions of the deal with the US. In 1903, President Roosevelt dispatched US warships to Panama City and helped Panama gain independence. 
The Hay-Bunau-Varilla Treaty of 1903, gave the US a 10-mile piece of land for $10 million and an annualannuity of $250,000 to build the canal, creating the Panama Canal Zone.
Almost after 10 years, it was completed in 1914 with 5609 more lives lost.  Its operation began on 15 August 1914.    

After building the canal, what did the US transfer it to Panama in 1980?
The Canal Zone was under US control when it was handed over to Panama after the Torrijos-Carter treaty in 1977.  The US negotiated the treaty and handed over the canal to Panama for the following reasons. First, it impacted the relationship between Panama and the US and, overall, with Latin America. It was a symbol of colonialism for Latin Americans and anti-colonialist and anti-imperialist sentiments were high among people. The Canal Zone was considered American territory and Panamanians were not allowed to enter, which angered the locals. There were many student protests and multiple riots to oppose the differential treatment of Panamanians in their own country. 

Second, it was an economic decision, the US lost money in the operations and maintenance of the canal after WWII and wanted to hand it over to the UN during Trueman’s presidency. However, they hesitated to sign the treaty because it was considered a national pride. For the same reason, it was criticised when Carter signed the treaty in 1977. Lastly, the US also had pressure to hand over the Panama Canal after the Suez Canal crisis, where the US asked France and the UK to withdraw forces and pushed for a diplomatic rather than a military solution.

 Why does Trump want the Panama Canal back?
Trump calls the handover a foolish mistake of the Carter administration. For him, the high transit fees and Chinese influence in canal operations, are the primary reasons. He claims that the Chinese are influencing the operations of the canal. However, the Panama Canal Authority, an autonomous government body, operates the canal. Trump might be referring to the two ports, Balboa Port and Cristobal Port, both at the ends of the canal and operated by a Hong Kong-based company. Before the handover of the canal in 1999, the tender to manage the port was won by a company called Hutchison-Whampoa for 25 years, and in 2021, it was extended to another 25 years.

Recent claims that the US has started to reclaim the canal were referred to, the Hong Kong based company decision to sell shares of its units to an investment group led by American company BlackRock.
Trump's claim to take it back has no legal backing, as in the treaty of Torrijos-Carter, there was no mention of the US taking it back under any circumstance. There were two important provisions: one was to maintain the neutrality of the canal and open it for the vessels of all countries. Second was the US's right to defend the neutrality of the canal and give priority passage in military emergencies. 

What does the above mean?
Trump has changed the dynamics of the region. His threats to take over the Panama Canal and Greenland show the approach towards strategically important points.  His threats could be interpreted as a negotiation tool and a way of telling Panama to reduce its relationship with China. Panama was the first country to join China's Belt and Road initiative in 2017, and other Latin American countries followed. After the visit of Secretary of State Marco Rubio in February, Panama decided not to renew its BRI agreement.

Panama recently launched an audit of Panama Ports Company to ensure efficient and transparent use of public resources. Additionally, they have complained to the UN about Trump's threats. Regarding Latin America, the Panama Canal's control has been significant as an anti-colonial, anti-imperialist movement in the region. So, threats to take control back could be interpreted by the other Latin American countries as a threat to their sovereignty and could be considered a new form of suppression for the region, which could mean closer ties to Asians.

About the author
Vaneeta is a postgraduate student at the Centre for South Asian Studies, Pondicherry Unievrsity.  
 

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